MISSION INTANGIBLE

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MISSION:INTANGIBLE, the blog of the Intangible Asset Finance Society, offers critical comments on intangible asset, corporate reputation, and finance; supplemented by quantitative reputation metrics. Intangible assets include business processes, patents, trademarks; reputations for ethics and integrity; quality, safety, sustainability, security, and resilience; and comprise 70% of the average company's value. MISSION:INTANGIBLE is a registered trademark of the Intangible Asset Finance Society.

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Dell: Computer company or soap opera?

C. HUYGENS - Monday, August 19, 2013
Dell, a company best known recently for the insider's baseball being played by its founder and various investors, also sells computers. There is merit in recalling this latter aspect of the business, since it is apparently not top of mind among many of the company's stakeholders.

Huygen's reported two weeks ago in a note titled "Anyone's Guess" that the Steel City Re reputation metrics were forecasting major changes at Dell evidenced by a material level of uncertainty; i.e., a high Consensus Trend. Huygen's also reported that expectations indicated by upward movements in the Reputation Premium signaled a net improvement in overall reputation and the value arising.

Lost in all this data of volatility and higher expectations is that one stakeholder group in particular was probably not overly excited by the turmoil: customers. The New York Times put it this way last week:

Dell reported net income of $204 million for its fiscal second quarter, down 72 percent from the same quarter a year ago. Revenue was $14.5 billion, about flat from the same period a year ago, but better than the $14.18 billion that Wall Street had expected, according to a survey of analysts by Thomson Reuters.

The net result: As the reputation metrics suggested two weeks ago, change, and slightly more value. For the week where Dell reported a 72% drop in net income, Dell's equity was up 0.57%; the S&P500 was down 2.10%

Dell: Anyone's guess

C. HUYGENS - Thursday, August 01, 2013
Huygens believes that like Billy Beane and Nate Silver, he can predict the future with the aid of mathematical algorithms. Billy Beane, as popularized by the book and movie Money Ball, identified variables to the consternation of coaches everywhere that helped him better identify promising baseball players. Nate Silver, as popularized by the most recent election, identifies variables to the consternation of pollsters everywhere that help him better identify election outcomes.

Huygens has identified variables embedded in the Steel City Re reputational metrics and the Consensiv expression of same, the reputation scores, to better identify equity opportunities. RepuStars (Ticker:REPUVAR) and RepuSPX, reported each week on this blog, are additional expressions of those metrics which were first developed to better identify reputation risk and have since enabled reputation risk underwriting by Steel City Re. Unfortunately, one of the outputs of all these algorithms is the conclusion that there is nothing conclusive. As unsatisfying as that may seem, to Huygens, it is both wonderfully refreshing and yet another affirmation of Godel's Theorem.

Turning to today's non-prediction, the cyclic volatility of the Current RVM volatility metric, what Consensiv lucidly describes as the Consensus Trend, indicates that there is no consensus -- no clear agreement on what the future holds for Dell. The measure is ranked at the 78th percentile relative to the 19 peers in the computer hardware sector which is yet a further increase over the historic ranking of the 50th percentile. The value has been bouncing between 6 and 9% over the past few months. Change is clearly coming. Furthermore, stakeholders are signaling that whatever happens, it will increase Dells' value as reflected in the reputation ranking that's reached the 89th percentile -- what Consensiv helpfully describes as the Reputation Premium.

This is a movie that will be a nail biter to the bitter end.


Dell: Great expectations

C. HUYGENS - Thursday, April 18, 2013
These are interesting times for Dell and its diversity of stakeholders as three different groups fight to take control back from the public. The founder, Michael Dell, is offering $13.65. He's the ultimate insider with the best information, and low balling the value was a great strategy when he was the only game in town. Enter Blackstone at $14.25 and Carl Icahn at around $15.

The Steel City Re reputational metrics provide an interesting angle to this story. For one thing, all this attention was bound to drive up the CRR, a measure of relative reputational ranking, to the 76th percentile whereas only weeks ago, it was in the lowest quartile. Sudden movements of this magnitude are reflected the the Current RVM volatility which is approaching 8% -- a value of concern in that 7% is the threshold above which the relative risk of a major loss in market capitalization exceeds 1.0. Return on equity is now almost at the median for the 22-member computer processing hardware sector -- odds are now against that value remaining that high for long.


Dell: It tolls for whom?

C. HUYGENS - Sunday, January 27, 2013
Dell's endgame is nigh. The innovative business model that produced high quality low cost computers, and a service package to boot, has been overcome by events. Others are making computers better, faster and cheaper even as the market for PC's is being eroded by more powerful mobile solutions and remote storage.

Jonathan Salem Baskin, moderator of the Society's Mission Intangible Monthly Briefings, writes this for Forbes magazine (Jan 26):

Dell has suffered and languished for years. We all watched the long, slow slog, and at numerous points along the way the leaders of the business could have realized that things weren’t just ‘tough this quarter’ but ‘evidence of a deeper ill,’ and then done something about it. The company didn’t teleport to this point in time. I wonder if Dell failed to understand its reputation — the ongoing narrative of business performance, which has a closer connection to things like operating costs, profit margins, and how those qualities are valued by external stakeholders — and therefore missed its obligation to manage it? If so, it’s not fixable with marketing or financial legerdemain.


The reputational value metrics provided by Steel City Re affirm the above in stark quantitative terms. The company's reputational value vital signs, top left bar chart, show below median measures with decreasing volatility, a depressed CRR (measure of relative rank) at the 14th percentile, below median ROE, and an indication of expected change that is only a further exacerbation of ongoing negative trends. RVM (a measure of reputational value) volatility no longer follows sector or market concerns. The company's reputation is now wholly driven by expectations concerning its viability, not its profitability or renewed market engagement. The metrics are those of a company whose business model has evaporated - a failure of strategy at the highest managerial levels.


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